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Real Estate Portfolio Size and Risk Reduction

Author

Listed:
  • Steven Devaney
  • Stephen Lee

Abstract

Risk diversification is important to all investors. However, commercial real estate investors in the UK tend to concentrate their holdings in relatively few properties; as a consequence they are vulnerable to significant risk of underperforming the overall market or a target rate of return. Given the potentially high risk of owning only a few properties, we follow de Vassal (2001) and examine the return/risk benefits of holding more properties in a portfolio. The analysis uses Monte Carlo techniques to simulate total returns of real estate portfolios with varying numbers of properties using individual property data over the period 1994-2003.

Suggested Citation

  • Steven Devaney & Stephen Lee, 2005. "Real Estate Portfolio Size and Risk Reduction," ERES eres2005_155, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2005_155
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2005-155
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    Cited by:

    1. Brett Robinson, 2012. "How many leases are enough to diversify a portfolio of multi-let industrial properties?," ERES eres2012_351, European Real Estate Society (ERES).

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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